[Click e-Stock] "Korean Air, Beneficiary of Both China-Korea-Japan Travel Recovery and US AI Investment"

On January 16, KB Securities raised its target price for Korean Air from 28,000 won to 31,000 won, citing the recovery of passenger profitability on China routes due to improving Korea-China relations and a boost in the air cargo sector driven by a surge in artificial intelligence (AI) investments.

Korean Air's standalone operating profit for the fourth quarter of last year was 413.1 billion won, exceeding market expectations despite a 5.1% year-on-year decrease. This was attributed to a clear recovery in travel demand between Korea and China, as evidenced by a 24.7% increase in Chinese arrivals and an estimated 24.3% rise in Koreans traveling to China in October and November last year. During the same period, the number of foreign visitors to Korea also grew by 12.7%, indicating strong inbound travel demand.

Kang Sungjin, an analyst at KB Securities, stated, "In particular, the number of arrivals to Korea from the Americas increased by 12.4% year-on-year, suggesting that even if the number of transfer passengers from China to the United States declines, the profitability of transpacific routes remains unaffected. In addition to stronger-than-expected year-end consumption in advanced economies, the surge in AI investments in the United States has led to robust demand for transporting data center equipment, resulting in a stronger-than-expected cargo market."

Korean Air's annual operating profit for this year is projected to reach 1.4745 trillion won, up 20.9% from the previous year. Kang commented, "Korean Air is experiencing the best-case scenario, with industry conditions improving while oil prices remain low. With international passenger fares rising and cargo rates only slightly declining, the company is expected to fully benefit from the drop in oil prices."